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Should Policy-Based Lending Still Involve Conditionality?

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  • Stefan G. Koeberle

Abstract

Traditional conditionality in policy-based lending is often criticized as being ineffective, intrusive, and corrosive. Disillusionment has led to proposals to replace ex ante conditionality with ex post conditionality and to focus on ownership, selectivity, and partnerships. This article reviews experiences with conditionality in the World Bank's policy-based lending and explores the benefits and drawbacks of various approaches. It argues that conditionality should play a central role in policy-based lending--but cannot substitute for country ownership and good policies. Moreover, an exclusive focus on conditionality based on ex ante commitments or ex post results may not be practical or useful for the Bank's policy-based lending. Thus a key recommendation is to use conditionality selectively, tailored to country circumstances. Indeed, an eclectic mix of traditional and new approaches is already being used--with programmatic policy-based lending offering a particularly promising way to reconcile the debate between the traditional ex ante approach and the aspirations of a results-based approach to conditionality. Copyright 2003, Oxford University Press.

Suggested Citation

  • Stefan G. Koeberle, 2003. "Should Policy-Based Lending Still Involve Conditionality?," World Bank Research Observer, World Bank Group, vol. 18(2), pages 249-273.
  • Handle: RePEc:oup:wbrobs:v:18:y:2003:i:2:p:249-273
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    Cited by:

    1. Jac C. Heckelman & Stephen Knack, 2008. "Foreign Aid and Market-Liberalizing Reform," Economica, London School of Economics and Political Science, vol. 75(299), pages 524-548, August.
    2. Smets, Lodewijk & Knack, Stephen, 2014. "World Bank lending and the quality of economic policy," Policy Research Working Paper Series 6924, The World Bank.
    3. Stefan Koeberle & Harold Bedoya & Peter Silarszky & Gero Verheyen, 2005. "Conditionality Revisited : Concepts, Experiences, and Lessons," World Bank Publications, The World Bank, number 7346.
    4. Raymond J. March & Conrad Lyford & Benjamin Powell, 2017. "Causes and barriers to increases in economic freedom," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(1), pages 87-103, March.
    5. Bag, Parimal Kanti & Roy Chowdhury, Prabal, 2016. "Gradualism in aid and reforms," Journal of International Economics, Elsevier, vol. 103(C), pages 108-123.
    6. Martin Knoll, 2008. "Budget Support: A Reformed Approach Or Old Wine In New Skins?," UNCTAD Discussion Papers 190, United Nations Conference on Trade and Development.
    7. Operations Evaluation Department, 2004. "2003 Annual Review of Development Effectiveness : The Effectiveness of Bank Support for Policy Reform," World Bank Publications, The World Bank, number 14925.
    8. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, Elsevier.
    9. repec:rss:jnljms:v1i11p1 is not listed on IDEAS

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